FIIs have been consistent sellers in the market and I am not talking only about the Cash market where they have sold net for Sept so far after a similar trend in August. The Index futures OI that I plot for FIIs [blue line] and shows a similar trend for much longer. FIIs were Max Long in Index futures a year ago. This year they did not add up that much and since June they are in exit mode.
Now positions came very close to zero in August and the markets bounced. Near Zero readings have caused market bottoms before, except in larger bearish trends when the Positions declined below the lower red line and FIIs were short in index futures. So either that is likely or FIIs will be pushed into buying again from here which could propel the market up like crazy. In that sense this is an inflection point.
IF FIIs keep selling then they will be going to the other side of the trade from Long to Short else they should start buying back. I have drawn a falling trendline from the June high and as long as the trend remains below it, I should think it is down. Starting Sept the blue line is falling again and not rising despite a rising market so they are not yet buying meaningfully.
The second chart which shows the extreme in Options OI in client positions as a % of the total. Look at the Red circles around all the tops since 2015. We are in the red zone again. What I do not know is whether large part of the decline will come this month or the next because of all the Put writing that has been done. But the upside should be limited on this indicator.
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